Buy Tata Consultancy Services: target of Rs 4250: Sharekhan

Sharekhan's research report on Tata Consultancy Services

TCS is well-positioned to benefit from enterprises’ rising spends on digital and growth and transformation initiatives given its full service model, strong domain expertise, quality client base, proven track record in winning large deals and solid execution. We believe TCS can sustain a 26% EBIT margin in FY2021 despite supply-side challenges given strong revenue growth, higher hiring of freshers and excellent talent management policies. USD revenue and earnings to clock a 13%/16% CAGR over FY2021-23E; we continue to prefer TCS on account of its robust business model, healthy FCF generation and higher payouts.

Outlook

We maintain a Buy on TCS with a revised PT of Rs. 4,250, given strong market positioning in digital technologies, industry leading retention rate and increasing digital and transformational spends.